Oil falls $1 as Saudi Arabia considers output rise

Sydney: Oil fell more than $1 on Monday toward $95 after Saudi Arabia said that OPEC would discuss boosting oil output at an upcoming meeting to cool surging oil prices.

US light crude for December delivery fell as much as $1.28 in early electronic trading and was down $1.14 at $95.18 a barrel by 0344 GMT.

US oil struck a record high of $98.62 a barrel last Wednesday due to winter supply concerns and a falling US dollar.

London Brent crude lost 88 cents to $92.30 a barrel.

“The OPEC uncertainty does provide some downward pressure this morning but the market may shift its focus to the expiring December options contract later in the day and start rising again,” said Gerard Burg, a resource analyst at the National Bank of Australia.

Saudi Arabia, the world’s top oil exporter, said on Sunday the exporter group would discuss an increase in output at an upcoming meeting in an effort to cool record prices nearing $100 a barrel.

Saudi Oil Minister Ali al-Naimi did not make clear whether he was referring to an OPEC heads of state meeting in Riyadh later this week or its next formal policy meeting on Dec. 5 in Abu Dhabi. Qatari Energy Minister Abdullah al-Attiyah said later on Sunday that he did not expect an output decision in Riyadh.

But the fact that al-Naimi, the cartel’s most influential voice, raised the possibility of an increase put traders on alert after a more than 40 percent surge in prices since mid-August, which most ministers have blamed on speculation, politics and a weak dollar.

“This (increase in output) is premature but we will discuss the issue when we meet,” Naimi told Reuters in Kuwait in what appeared to be his first public comments since oil vaulted above $80 for the first time two months ago.

The rally has barely paused since then, despite the 500,000 barrels per day (bpd) increase in production that Naimi persuaded his peers to accept at their last meeting in September.

Analysts said the decline in Asia’s stock markets, led by Wall Street’s sharp losses on Friday, could also be weighing on oil prices.

Oil’s fall on Monday was also helped by comments from Nigeria’s oil minister Odein Ajumogobia, who said there was no fundamental reason for oil to be at $100 a barrel, and he expected record prices to be short-lived.

EXPIRING CONTRACTS

Analysts said they expected oil prices to be highly volatile this week, also influenced by the expiry of NYMEX December options contracts and the restart of production at North Sea fields following storms.

Some 42,000 options contracts to buy oil at $100 were still open on Friday despite the expiry on Tuesday. Experts said speculators might try to push oil into triple digits ahead of the expiry, but prices could tumble once the options expire.

The dollar extended its slide to hit an 18-month low against the yen on Monday on jitters about bigger credit-related losses at U.S. financial firms, offering support to oil prices.

Oil production has restarted at a number of North Sea fields that had been affected by storms, but Nexen Inc said on Friday it had temporarily halted production at its 200,000-bpd Buzzard oilfield after storms damaged one of its power generation turbine exhaust stacks.